A privatised Telstra will abandon the bush

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Forget all the promises, Telstra's priority is to
preserve its monopoly, writes Ross Gittins.

Are you having trouble following all the twists and turns in the
Telstra saga? Let me explain what I think it adds up to. And let me
do it not from the viewpoints of the politicians or the company,
but from the viewpoint of the telecom user.

That's actually the key to making sense of it all: being
conscious of the different hats people are wearing. Even you and I
can wear at least three.

We can think of ourselves as customers of the telecommunications
industry. We can think of ourselves as taxpayers, ultimate owners
of the Federal Government's 51.8 per cent majority ownership of
Telstra. Or we can think of ourselves as among the more than 1.6
million Australians who own the other 48.2 per cent of shares in
Telstra.

The beginning of wisdom is to see that phones and other telecom
services are so ubiquitous in our lives that our interests as users
outweigh our interests as taxpayers or as existing minority
shareholders.

The other thing to remember is that Telstra is our former
national monopoly phone company. It still owns most of the national
terrestrial phone network, so that its competitors have to use its
network and pay it for the privilege. How much should they pay?
Telstra thinks the fair price is a lot higher than its competitors
(and the Australian Competition and Consumer Commission) think is
fair.

Now, you may think the way to maximise the benefits from the
decision to end Telstra's position as the national monopoly carrier
is to focus on establishing a level playing field between it and
its competitors.

This would do most to foster the intense competition that would
improve the quality of service, encourage innovation, hasten the
introduction of the latest technology and cause the cost savings
from that technology to be passed on to customers.

To me, the obvious thing to have done was to break Telstra up,
separating its natural monopoly - the network - from its other,
retail activities. But that's never been the way John Howard has
seen it. Since before his election in 1996, he's seen the key to
telecommunications reform as to get Telstra into private
ownership.

Just why he believes that he's never properly explained.

His achievement of a majority in the Senate has revived his
determination to get the completion of privatisation approved, but
the wavering of Senator Barnaby Joyce has had to be accommodated.
So today we find him determined to ram the legislation through
Parliament by the end of this week, even though the Senate
committee got just one day to examine it and the interested parties
are scrambling to digest its content.

Why the indecent haste? For the same reason a high-pressure
salesman wants to close a deal immediately. To stop anyone - but
particularly Joyce - having time to change their mind about the
deal done between the Coalition parties.

And also to get the controversy over selling Telstra - of which
the public has never approved - resolved and out of the public eye
as quickly as possible.

But how do we explain the strange behaviour of Sol Trujillo and
his three amigos, which has so annoyed Howard and his cabinet
colleagues? Why on earth would they want to talk down the Telstra
share price, admitting its dividend rate can't be sustained, that
14 per cent of its lines had faults and that it has been
underinvesting in infrastructure?

That's simple. Telstra is doing in a more blatant,
no-holds-barred American way what it has always done and always
will do: fighting to protect its monopoly privileges.

As part of his attempt to mollify the bush and its Nationals
protectors, Howard has included in the sale legislation a
requirement that Telstra be formed into "structurally separate"
business units - network and wholesale, and retail - to limit its
ability to overcharge its retail competitors.

But what Telstra claims to be unfair and unreasonable, its
competitors and the ACCC regard as inadequate and open to abuse by
Telstra.

Trujillo is not some crazy Yank who's lost the plot. He's
playing hardball with the government regulator the way he always
does and was obviously hired to do again. He's acting with the
support of Telstra's board, which puts the (longer-term) interests
of the company and its shareholders ahead of the interests of the
nation's telecom users.

Which is an ominous sign for the future. It suggests that, as
soon as Telstra has its freedom from government ownership, it will
be doing all it can to obstruct the regulators and avoid its legal
obligations to the bush and any other unprofitable users.